Some stainless steel producers chose an interesting manner to raise prices in April 1969: An official announcement was made that most disco...
Some stainless steel producers chose an interesting manner to raise prices in April 1969: An official announcement was made that most discounts on stainless steel sheet would be eliminated. l1/ On July 30, 1969, a fascinating series of events began. U. S. Steel announced a list price increase. General Motors' Fisher Body division, which was using 10.4 percent of total industry shipments, advised U.S. Steel ~?,~old back on shipments "pending a re-evaluation of the competitive situation with respect to steel prices." General Motors' move was considered uncharacteristic and appears to have been an effort to get bids from other suppliers who would refuse to follow U.S. Steel's lead. However, the market demand was sufficient to make the price increases stick:
the price hike was followed by other steel prOducers and even Fisher Body had to resume steel purchases at the new prices. 14/ These events lend further support to the position that U.S. Steel's price leadership is "barometric" rather than "dominant" or "collusive." If the price hike had been to a level at which industry prices were above industry marginal costs, then faced with the "countervailing power" of General 13/ "Washington Steel Boosts Stainless Price by Ending Most DIscounts on Sheet Items," Wall Street Journal, April 11, 1969: "Allegheny Ludlum Steel, Eastern Stainless Follow Discount Withdrawals," Wall Street Journal, April 17, 1969. 14/ "To U.S. Steel, General Motors Speaks for the Little Man," wall Street Journal, Aug. 5, 1969: nG.M. 's Fisher Body Unit Resumes Buying of Steel After Resisting Prices," Wall Street i Journal, Aug. 7, 1969~ p. 15. -179- Motors, it is likely other producers would have sought General Motors' business at the lower quotes. However, General Motors' effort to halt the price hike failed and additional sùpport is gained for the view that the pr ice hike was "barometr ic.; i.e., it merely reflecteõ oasic supply and demand conà itions. The price à evelopments of 1969 were summarized by the Steel Market Committee of the N.A.P.M.:
.-u.. _. The fact that most of the announced'price increases stuck is probably not too surpr is ing in v iew of the world demand for steel dur ing the past year. . .. It would appear that the law of supply and demand was at work. 151 The boom in steel demand eased by June 1970. Exports were at record levels for the first six months of 1970, and remained strong in the third quarter due to orders placed dur ing the second quar ter. However, the strong demand for exports subsided by June 1970. 161 The strong export demand was partly responsible for the continued firmness of prices through June 1970. !II The first steel products on which unannounced pr ice cutting appeared were stainless steel bar, rod, wire, and forging billet. These price cuts began in mid-April 1970 151 "The Steel Market,. Bulletin of the National Association õr Purchasing Management, Jan. 21, 1970, p. 6. 161 "Boom in U.S. Steel Exports Is DiminiShing, Mills Say, and 'Prices are Also Declining," Wall Street Journal, June 29, 1970, p. 8. 171 "World Actions Dominate Steel Price Movement
," Journal of Commerce, May 4, 1970,p. 1. -180- and were in the two to three percent range. They ran counter to the overall steel pr ice trends. ~/ By mid-June 1970, the general easing of demand led to selective pr ice shading, most notably in big volume steel sheet. The industry announced a five percent increase in sheet steel prices, effective June 1, 1970. Rowever, steel shipments were running significantly below the 1969 pace, and discounts ~-~ . -.- to big tonnage sheet users appeared. Widespread price discounts were not manifest, but the pr ice spiral of the previous 18 months was hal ted. ~/ On September 13, 1970, Bethlehem Steel responded to secret price shading on some galvanized steel products by eliminating the extra charges on certain extra smooth or temper-rolled galvanized steels. Bethlehem said the move "is directly responsive to a competitive situation in the market place." 20/ The report of the Steel Market Committee of the N.A.P.M. on November 18, 1970, stated:
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